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Building a business with affiliate programs

A question very often asked by entrepreneurs is if they can build a real business (for the purpose of this article we are defining it as equal to real median household income of ~ $43,000 for each person employed in the business) with just affiliate programs. A perusal of the websites of merchants that rely on affiliate programs and a host of other websites on the Internet might lead you to believe that affiliate programs provide you with a 'get-rich-quick" program. The answer is that for over 95% of the people the affiliate programs produce essentially pocket money. Yes, there are affiliates that have real businesses but these are not businesses that can be started overnight by anyone and money will not come the next day.



The limitations of affiliate programs



  1. Since the clickthrough rates for affiliate programs tends to be pathetically low, high traffic is key. While you might be tempted to "buy" traffic from all the sellers out there, it doesn't work very effectively in increasing revenue with affiliate programs. Traffic quality is key and you can't buy that by redirecting traffic to your website through some hideous means. Quality traffic is build over time through content management that leads to inbound links which result in higher page rank and the cycle continues. This can sometimes takes months to years.
  2. If your visitors click (and you can use many creative techniques to motivate your visitors to click) but do not take the next desirable step (for you to make a commission), they have left your website. Doesn't help you much. You did all the work in attracting them to your website but it was a total waste. This is a major issue for content-rich websites.
  3. Many merchants actually pass on all the costs associated with chargebacks and other types of credit card fraud even though you had nothing to do with it. These criminals just happened to be on your website.

Suggested business model

Use affiliate programs as one of the channels for generating revenue for your website. There are other revenue streams, for example, advertising, that provide a more stable stream of revenue. You might also want to consider advertorials, product placement, product recommendations and endorsements, etc. (all for a one-time payment).